We cover topics that affect the healthcare system, individual hospitals and physicians, and patients' wallets. Whether you're involved in patient billing, or whether you're a patient with a bill, we'll do our best to help you make sense of it all.

Are You An Inpatient Or An Outpatient? Thousands Of Your Dollars Depend On The Answer

The federal agency in charge of Medicare this month released new rules for determining whether patients admitted to hospitals can be reimbursed as an inpatient (which means higher rates to the hospital and low co-payments for patients) or as an outpatient (lower rates for the hospital and higher copayments for the patient).

As many Medicare recipients know, just because you are admitted into a hospital doesn’t mean Medicare will pay all the bills. If you are admitted under Part A, the cost to the patient is minimal; Part B, on the other hand, comes with copayments and coinsurance costs.

The question that many Medicare recipients ask is, “How do I know if I qualify for Part A or Part B.” “Am I an inpatient or an outpatient?” “Is my treatment in a hospital ‘medically necessary’ or not?”

Centers for Medicare and Medicaid Services (CMS) earlier this month published their final rule, effective Oct. 1, that spells out who qualifies or not for Medicare Part A. The new rules should make it easier for Medicare beneficiaries to know before they leave the hospital whether or not they qualify under Part A, but as with all things involving the federal government, there are catches.

The new rules list three basic requirements for a hospital to claim a patient under Part A:

The first requirement is that a physician or other qualified practitioner must order a patient’s hospital admission as an inpatient in writing, sign that order. The signed “Physician Order and Certification” must be included in a patient’s medical record.

Medicare recipients, after being admitted to a hospital, should ask if such a record exists. If it doesn’t, don’t panic. Under the new rules the hospital has until a patient is discharged to generate such an order. Medicare recipients or their caregivers should check with the hospital before discharge if the order is on file.

The second requirement is that you have to spend two midnights in the hospital. CMS in its final rule held firm that it doesn’t matter what kind of treatment you get if you don’t spend the required amount of time. If you enter a hospital one minute after midnight, end up in intensive care, but are discharged one minute before midnight at the end of your second full day, there’s a good chance hospital will not be reimbursed under Medicare Part A. Sorry.

There are exceptions to the rule, of course. The new rule makes provisions for patients who, for example, visit their physician for some complaint, and the doctor sends them immediately to the hospital for observation. If the patient is admitted as an inpatient, hospitals can claim the time spent in the physician’s office and in observation toward the two-midnight mark. But one suspects that such submissions will be red-flagged by CMS’s claim auditors, and it is more than possible hospitals will decide it is not worth the trouble to make the case.

The third requirement … well, this is where it gets a little tricky. Regardless of whether a physician orders that you be admitted, regardless of whether you spend two midnights in a hospital bed, the hospital will still have to justify your admission within your medical case file. And how will you know if your condition is “medically necessary” to qualify for Medicare Part A reimbursement? You won’t, nor will your hospital, until they submit the bill to Medicare. CMS reserves the right to review any bill submitted for reimbursement to insure the services and hospitalization were “medically necessary” and that the claim has been coded properly and has the correct supporting documentation. CMS can also just order a claim reviewed for whatever reason.

So what if the hospital’s claim under Part A is denied? The good news for healthcare providers is that the new rules allow them one year from time the service is provided to resubmit the claim under Part B. For patients this will be an unwelcome development, as the hospital may also seek from them the copayments allowed under Part B.

Hospital practices regarding collecting of Part B copays will vary. At this summer’s annual conference of the Healthcare Financial Management Association, an association of healthcare finance executives, several hospitals reported that they don’t bother to collect from Medicare patients when claims change from Part A to Part B. However, now that the rules separating Part A and Part B have been better defined, expect more cash-strapped hospitals to institute business processes to recover these costs from patients.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.